Presentations to Reporting Entities

Slide 1: Presentation Overview

• Introduction
• What is a risk-based approach?
• Legislative and Regulatory Requirements
• Risk-based approach - in detail
• Higher risk situations
• Examples of poor risk assessments
• Additional considerations

Slide 2: Introduction

• The PCMLTFA was amended in December 2006, authorizing the creation of new requirements through the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations.
• A compliance program initially required four elements. As of June 23, 2008, it also has to include a risk assessment on money laundering and terrorist financing.

Slide 3: What is a Risk-based Approach?

• Identify and measure potentially higher risks for money laundering and terrorist financing.
• Develop strategies to mitigate those risks.
• Focus resources in areas that are deemed to be higher risk.

Slide 4: Legislative and Regulatory Requirements

• The compliance program must now include a documented risk assessment.
• The risk assessment for money laundering and terrorist financing must take into account the following factors:
  • client and business relationships;
  • products and services, and delivery channels;
  • geographic location where activities are conducted; and
  • any other relevant factors.

Slide 5: Legislative and Regulatory Requirements (cont'd)

• The review of the compliance policies and procedures, including the risk assessment, risk mitigation and ongoing monitoring, must be done every two years.
• The findings of the review, updates made to the policies and procedures relative to the review, and the status of their implementation must be reported in writing to a senior officer.

Slide 6: Legislative and Regulatory Requirements (cont'd)

• For all activities that have been identified as high risk for money laundering and terrorist financing, the reporting entity must develop and apply policies and procedures to:
  1. mitigate the identified risks of a money laundering or terrorist financing offence;
  2. take reasonable measures to keep client identification information and beneficial owner information up to date; and
  3. take reasonable measures to conduct ongoing monitoring to detect suspicious transactions.

Slide 7: Risk-based Approach

• Risk assessment of business activities and clients;
• Controls to mitigate risks identified;
• Ongoing monitoring of accounts and financial transactions that pose higher risks;
• Keeping client information, and if applicable beneficial ownership, up to date.

Slide 8: Risk Assessment

A risk assessment is an analysis of potential threats and vulnerabilities to ML and TF to which a reporting entity is exposed.

Complexity of the risk assessment will depend on the nature, size, complexity and risk factors of the reporting entity.

• Client and business relationships
• Products and services and deliver channels through which the RE offers them
• Geographic locations of the reporting entity's activities
• Other factors relevant to the reporting entity's business or sector

Slide 9

There is clearly no single risk rating methodology for all reporting entities

Slide 10: Risk Assessment as a Two-stage Process

• products and services;
• delivery channels;
• geographic locations; and
• other relevant factors.